Thu, November 27, 2008
Business > Industries > Police investigating China's richest man

Report says that Chinese tycoon held in stock scandal

2008-11-27 10:05:49 GMT2008-11-27 18:05:49 (Beijing Time)  SINA.com

Huang Guangyu, one of China's wealthiest entrepreneurs and the chairman of the country’s biggest electronics retailer, was detained last week by the police as part of an investigation into stock manipulation involving a relative's company, according to a report in a Chinese financial magazine.

Shares in Gome Electrical Appliances, the company Mr. Huang controls, were halted before trading opened Monday on the Hong Kong stock exchange pending a company announcement, The New York Times's David Barboza reported.

In a statement released Monday afternoon, Gome suggested that Mr. Huang could not be located. "Gome management is trying to verify whether our board chairman has been detained," the company said in its release. "Up to now, we have not received any legal documents from any department about this information."

Gome executives insisted the company was in good health, and even released its third quarter earnings report Monday. But the controversy surrounding the 39-year-old Mr. Huang, who has been at or near the top of the list of China's wealthiest individuals for years, has shaken a company that has seen its stock price sink in recent months. Gome has been dropping sharply, and closed Friday at about 1 Hong Kong dollar a share, down from about 5 in June.

Xinhua News, China's official news agency, said , that Mr. Huang's case was being handled by the Beijing police. A spokesman for the Beijing police declined comment Monday evening.

Earlier this month, Forbes magazine listed Mr. Huang as China's second-wealthiest individual, estimating his wealth at $2.7 billion. The Hurun Report, which also tracks wealthy individuals in China, said a few weeks earlier that he is the nation's richest person, worth about $6.3 billion.

One of the first reports of Mr. Huang's detention appeared Sunday on the Web site of Caijing, a respected business magazine known for its investigative reporting. The magazine said Mr. Huang was detained last Wednesday as part of a stock manipulation case involving a company controlled by his elder brother, Huang Junqin.

The report said shares of Shandong Jintai, a manufacturing and drug company, soared last year before nose-diving. Xu Shunfu, board secretary at Shandong Jintai, said in a telephone interview: "About Huang Guangyu, or anything about his brother Huang Junqin, we won't give any comment now."

Shares in Shandong Jintai were also halted before trading began Monday in Shanghai.

Two years ago, Caijing reported that the Huang brothers were being investigated for obtaining illegal loans. But in January of 2007, Gome issued a statement saying that Huang Guangyu had informed Gome that the government had been investigating another company he controlled but had terminated the investigation.

For years, Mr. Huang — who also goes by the name Wong Kwong Yu in Hong Kong — has been considered one of the country's most dynamic young entrepreneurs. Born in southern Guangdong Province, he is a high school dropout who moved with his brother to Beijing at age 16 and began selling radios and gadgets from a small shop. With $500 of seed money, they eventually formed the nation's biggest electronics retailing chain, a kind of Best Buy of China.

Known as the "price butcher," Mr. Huang has turned Gome Electrical Appliances into a nationwide company with over $6 billion in sales last year. In an interview in 2006 with the Chinese media, Mr. Huang said his company could compete head-on with foreign retailers entering the Chinese market. "We are not afraid of foreign retailers' competition," he said.

(Agencies)

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